SMM Morning Review - 2012/2/2 Copper Market

SHANGHAI, Feb. 2 (SMM) –The US and European markets continued to digest positive manufacturing figures out of China, Germany and the euro zone area Wednesday. The first growth in German manufacturing in four months and an unexpected expansion in China's manufacturing sector in January boosted investor risk appetites. Furthermore, the US later announced its manufacturing activity was also good in January, which helped US equities close with gains and LME copper prices challenge a high of USD 8,465/mt. However, market attention at the tail of trading shifted to Friday's US non-farm payrolls, which were expected to be pessimistic since the ADP employment data came in softer than markets anticipated. Consequently, LME copper prices suffered profit-taking and pared daily gains before finally ending at USD 8,449/mt.

Comex copper prices fell after initially increasing this morning. Despite positive manufacturing data overnight, a poor reading in the ADP employment data and the release of the US non-farm payrolls this Friday will keep investors cautious. Moreover, LME copper prices faced resistance at the 5-day moving average for two consecutive days. As such, LME copper prices are unlikely to increase during today's Asian trading session, with prices expected between USD 8,370-8,470/mt. Chinese stock prices will probably fluctuate in a narrow band after a high open since cash flows remain tight. SHFE copper prices will mainly fluctuate after a high open due to persistent resistance, and SHFE 1204 copper contract prices will fluctuate in the RMB 59,500-60,400/mt range. Spot copper discounts are estimated between negative RMB 350-200/mt versus SHFE 1202 copper contracts.